Less protection against dismissal, more fixed-term contracts - that's what the coalition is planning

More fixed-term contracts, less protection against dismissal for high earners and more leeway for bakeries on Sundays: the government wants to reform labor law. What should change and what is still open

FAQ Coalition plans in labor law Less protection against dismissal, more fixed-term contracts As of: November 11, 2026 • 4:44 p.m

It is a controversial topic within the coalition - labor law reform. At the beginning of July, after weeks of preparation, the coalition committee agreed on a reform package to lead Germany out of the economic crisis.

The Union and employers had recently increased the pressure to get the agreed relaxations underway soon. The criticism was primarily directed at the then Labor Minister Bärbel Bas (SPD). The decisions were implemented too slowly. Bas unexpectedly resigned in mid-October. Now her successor Alexander Schweitzer (SPD) has presented a first draft. High-income employees and young professionals are likely to be particularly affected by the changes.

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The government wants to encourage companies to hire new employees despite the economic crisis. She wants to achieve this, among other things, with a new fixed-term regulation, which is likely to particularly affect young professionals.

Specifically, the possibility of fixed-term contracts without an objective reason is to be expanded - for hires until December 31, 2030. "Up to this total period of four years, a maximum of six extensions should be permitted," says the draft law.

The paper is available to the ARD capital studio. The Süddeutsche Zeitung and the dpa news agency first reported on it. The ministry says that fixed-term employment relationships bring with them considerable uncertainty for the affected employees - especially in their own life plans. Therefore, this regulation is limited in time. It expressly only serves to bridge economically challenging times.

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Anyone with a high annual income should only enjoy limited protection against dismissal. Employers therefore have the fundamental option of dismissing employees with a gross annual income of just under 180,000 euros with a severance payment. According to the IAB wage monitor, this affects around 0.27 percent of employees. Such a regulation already applies to senior employees.

The relaxed protection against dismissal is also about creating incentives for companies to hire highly qualified workers - because the law makes possible dismissal easier in the future. A transition period of 15 months should apply after the law comes into force.

It should be easier for public libraries, bakeries and pastry shops to open on Sundays. The draft stipulates that libraries will be able to employ staff for up to six hours on Sundays and public holidays.

And the existing regulations are to be expanded for bakeries and pastry shops. Employees will then be able to work longer on Sundays and public holidays than before, for example when it comes to producing and delivering goods that are sold on the same day.

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The co-determination of employee representatives is to be strengthened in certain large companies. According to the draft, this is directed against the “misuse” of the legal form of the European stock corporation (SE).

Large companies actually have to fill half of their supervisory boards with representatives of shareholders and employees. But in practice this can be circumvented using legal tricks. Currently, five out of six large SEs do not have equal co-determination, according to the federal government's fact paper. 480,000 employees are affected.

In the future, abuse should be proven more easily - through a simplified procedure. For example, trade unions and works councils could more easily initiate a procedure to determine co-determination. There should be stricter rules for employers when negotiating co-determination.

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There has so far been little reaction to the specific regulations in Labor Minister Schweitzer's draft. Economics Minister Katherina Reiche recently emphasized that Germany can only be competitive if labor productivity is increased. It's not just about a longer working life, but also about "working a little more and a little longer every day."

Reiche also hinted that the relaxed protection against dismissal for high earners could possibly be expanded. Specifically, she said: “We have to talk about the issue of protection against dismissal.” She doesn’t forget the fears of employees. But at the moment a “very strong, rigid, immobile protection against dismissal” is blocking real changes.

Many business representatives see it similarly. Annika von Mutius, CEO of Empion and member of the Ministry of Economics' Advisory Board for SMEs, told Table.Briefings that protection against dismissal in her company ties up enormous resources and causes high costs. The “problem: If terminations regularly end up in the labor court and additional legal fees arise, we think twice about hiring new employees,” she told the medium.

Union representatives, however, criticize the debate. The discussion about protection against dismissal would unsettle employees. “This does not contribute to the hoped-for relaxation of the economy,” said Isabell Eder, head of the legal and diversity department at the German Federation of Trade Unions (DGB), to WDR. "And if politicians now also move towards protection against dismissal, i.e. protection of the employment relationship, then this further aggravates the situation. Then, in case of doubt, people hold all their money together and say 'goodbye to economic growth' because then no one will spend any more money."

As quickly as possible, because the law is intended to help revive the economy, which has been burdened by international crises and conflicts. The draft is now being discussed in the government and could be passed in the cabinet in December and then in the Bundestag. The changes are scheduled to come into force at the beginning of 2027.

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More comprehensive changes to working hours are also being discussed. In principle, the eight-hour day should be made more flexible with a maximum weekly working time, as the Union and SPD had already announced in their coalition agreement.

The biggest planned social reform is currently changes to the statutory pension, including restrictions on early retirement and a further increase in the retirement age. According to recent announcements from Merz, there should be a cabinet discussion on this by Christmas. In addition, the government wants to present key points for the planned new pension capital column, which is to be formed by law in the new year.